First Step: Line Up A Mortgage

Q My wife and I decided we want to buy our first home in 1993. We are tired of wasting money on rent and want some tax deductions for mortgage interest and property taxes to subsidize our housing expenses. But we are unsure of the best way to buy a home. We have gone to a few realtor weekend open houses, and the agents were very eager to get us to make a purchase offer. But we aren't sure of the mortgage amount we can get. We don't want to rush into buying a home, but waiting doesn't seem like a good idea either, especially if interest rates go up soon. Which comes first: buying the house or getting the mortgage?

A: I'm glad you started the home-buying process by looking at a few houses to see what is available. This is the best buyer's market I can recall. Today is an ideal time to buy your home before more buyers come out of their winter hibernation.

Although those agents you met were eager for you to make a home purchase offer, your first step should be to pre-qualify for a home loan with one lender, such as your bank or S&L where you already do business. Most lenders gladly pre-qualify borrowers for home loans because they know you probably won't shop elsewhere for a mortgage.

You should continue shopping to see if you can find a better loan. However, pre-qualifying will show you the maximum mortgage available and it will alert you to any problems, such as credit report blemishes.

After you pre-qualify for a mortgage you can shop for a home with confidence knowing you have a written commitment, subject only to appraisal of the house you buy. However, for your protection, be sure your purchase offer contains a finance contingency clause such as "This purchase offer contingent on buyer and property qualifying for a 30-year mortgage of at least $100,000 with an annual fixed interest rate not exceeding 8 percent, a loan fee not more than 1.5 points, and a monthly payment not more than $733.76."

Q: We are trying to sell our home. Our agent brought us a purchase offer that was too far below our asking price, so we made a counteroffer. But we never heard from that buyer again. However, her offer contained a clause that worries me. It said the offer was contingent upon a satisfactory professional inspection of our house. We had no objections, but my husband and I have talked about that clause and wonder if it is commonly used. Your comments, please.

A: Professional home inspections are very frequently used. Most realty agents encourage their buyers to obtain such inspections, so they are aware of any problems with the house before purchase.

However, for the home seller's protection all buyer escape clauses, such as professional inspection contingency clauses, should contain a time limit, such as five business days. Of course, mortgage loan contingencies usually require a longer time limit, usually 30 days.

(Copyright 1992, Tribune Media Services Inc.) Bob Bruss' column appears Sundays in the Home/Real Estate section. Letters and comments should be sent to Bob Bruss, Seattle Times Newsroom, P.O. Box 70, Seattle, WA 98111.